Google is all set to implement a new billing system from April 26, but app developers and start-ups are unhappy with it. In fact, they have called the new billing system “Laagan tax” and have approached the Delhi High Court for reprieve.

Google’s new billing system will allow users to opt for “an alternative billing option next to Google Play’s billing system.” This comes after the Competition Commission of India’s (CCI) order in October 2022 when it asked Google to allow developers to use a third-party billing system.

The US-based Internet giant will allow app developers to utilise a third-party billing system, but it will impose a “service fee” of 11-26 per cent. In the previous in-app payment system, app developers and start-ups had to pay 15–30 per cent for the services Google offered.

Why are start-ups unhappy with Google’s user choice billing policy?

One of the main complaints is that the new system is “masked as another version” of Google’s prior billing system, according to the Alliance of Digital Foundation (ADIF), a think tank for digital start-ups in India.

Amit Ranjan, entrepreneur and previous co-founder of SlideShare, said, “Many Start-ups are against it because it takes away a big portion of part of their revenue and that will impact their profitability.”

Also read: ADIF wants Google to put on hold its new Google Play payments policy

“If the infrastructure player takes away a big chunk of the revenue, then they [start-ups] are basically left with very little,” he notes, adding that start-ups don’t have much choice as the mobile landscape is a duopoly of Apple and Google

Another criticism is that Google is leveraging its dominance in the app marketplace to impose entry barriers for other digital payments service providers. In his recent Opinion in businessline, Ritesh Malik, Director, ADIF, writes, “A reduction of 4 per cent by Google for developers choosing an alternate payment processor other than Google’s Payments Billing System (GPBS) via the User Choice Billing (UCB) route still forces developers to pay an anti-competitive commission to Google, ranging from 11-26 per cent.”

Why call it the Lagaan tax?

“Lagaan” is a fictional Hindi film from 2001, in which a British officer challenged Indians to a game of cricket as a bet against having to pay hefty taxes. Secondly, it reminds us of the harsh land taxes that were levied by the East India Company on farmers.

“Every time there is a public issue of this nature, you want to kind of wrap it up in words and phrases that the common man can understand,” says Ranjan. “And in that sense, I think the word ‘Lagaan’ is very clearly understood by the media and people when you say it,” he adds.

However, experts warn against using analogies.

Rahul Singh, Associate Professor of Corporate Law, National Law School of India University, Bangalore, “The British imposed a ‘Lagaan’ tax on land because it was legally owned by the State... land is a natural resource found in nature. But you will see that the mobile ecosystem of Android is not land because it doesn’t occur naturally. Once you have created something, I think the analogy breaks down.”

Quorum troubles

In its recent petition, the ADIF mentioned that it wants the Delhi High Court to issue a ruling to delay the UCB’s implementation until the CCI has made its decision.

However, the case is likely to be delayed due to the CCI’s poor bench strength. The Commission has just two members (the quorum for CCI is three), with one of them acting as the chairman. “Therefore, ADIF has also simultaneously moved to the Delhi High Court, challenging the new billing policy,” says Singh.

Also read: Delhi HC to rule on Wednesday on invoking of ‘doctrine of necessity’ by CCI in Google Play Store case

Possible Solutions

Some say that Google is justified in taking a certain amount of service fee in exchange for the exposure it gives to apps.

“Not all start-ups are heavily funded.”

“And that’s the beauty of digital: even a solo guy who is a great techie can probably create a unicorn,” says Faisal K, Chief Analyst and Founder, Techarc.

What Google should do, Faisal says, is have a service fee slab. So, ”If I’m a small developer, you may not charge me 30%, you may charge 5%,” he adds.

Google’s global legal troubles

Google has had legal troubles for its anti-competitive behaviour in several countries, including in the EU, and the USA.

Also read: Google Play Store case: SC dismisses Google’s appeal against NCLAT’s Jan 11 order

But, caution is well-advised. “How and why one should be penalised speaks volumes about the legal culture, as well as the commitment to the rule of law,” adds Singh.

You’re going to watch as sovereign governments all over the world realise that Google is abusing its dominant position in a way that harms their respective regional ecosystems and economies, says Ranjan. As of now, Google has not responded to our queries.